John Conomos discusses export ambassador role

The Australian Government has appointed two roving international ambassadors to find export opportunities for the domestic industry. One of them, John Conomos, the recently retired head of Toyota in Australia and 40-year veteran of the industry, joins Lateline Business.

Transcript

ALI MOORE, PRESENTER: As America's car industry works to get back on its feet with two of the biggest manufacturers emerging from bankruptcy, in Australia the Government's stepping up efforts to kick-start the local industry. It's appointed two roving international ambassadors to find export opportunities for the domestic industry. Steve Bracks, the former Victorian Premier who chaired the Government review into the car industry that formed the basis of the $6.2 billion car plan, and John Conomos, the recently retired head of Toyota in Australia and 40-year veteran of the industry. John Conomos joined me in the studio earlier today.

John Conomos, welcome to Lateline Business.

JOHN CONOMOS, CAR INDUSTRY AMBASSADOR: Thankyou very much.

ALI MOORE: You've been appointed roving ambassador for the car industry. In essence, are you salesman?

JOHN CONOMOS: I guess you could put it that way. Our job'll be to promote the industry as best we possibly can, with CBU cars and of course components. And as we all know, access to export markets is vital. A healthy export market is crucial for the well-being of the domestic car production. So, unless we get access to - greater access to greater markets with bigger volumes, we'll not be as successful as we would like to be.

ALI MOORE: At the same time, you've got two of the biggest carmakers working their way out of bankruptcy, you've got sales in decline around the world - they've been dismal. Is now the time to go around and knock on doors and say, "Hey, look at us. Buy what we've got"?

JOHN CONOMOS: I think it's a perfect opportunity. It's very difficult when things are buoyant - people really don't want to know you. But others - emerging markets such as China, perhaps India and the rest of the world would be now searching for low cost producers with high-tech and reliable supply requirements.

ALI MOORE: Your fellow ambassador, Steve Bracks; he's been allocated the US, as I understand it. You've got north Asia, particularly China. Is China as much a risk for the car industry as an opportunity?

JOHN CONOMOS: A risk in terms of flooding this market with imports?

ALI MOORE: A risk in terms of our competitive advantage.

JOHN CONOMOS: Oh, I don't think so. I think the opportunity for us, therefore, in that massive emerging market, running now at about 10 million; it's now the largest car market in the world. And of course, they're only on the brink of motorisation. So you could imagine the opportunities that prevail for aggressive and skilful exporters, such as what we've got in this country.

ALI MOORE: At the same time, you talk there about flooding the market. And i know in the past when you've had different hats on, you've warned of potential perils from things like a free trade agreement with China: if it's not two-way, it could be negative for the car industry. Do you still hold that view?

JOHN CONOMOS: Well that's the challenge. It could well be. But we rather look at it from a point of view of gaining access for our producers. CBU cars and of course component makers are a tremendous opportunity for us.

ALI MOORE: But how do you do that? I mean, as you just said, this is an industry in a country which produces 10 million a year, we produce one tenth of that, if we're lucky. They produce at a cost of, at some points, $1 an hour for labour. We don't come anywhere near that. How do we compete? Where do we fit?

JOHN CONOMOS: Well we have great skills in this country. We have engineering skills which are the best in the world. And so what people tend to judge our performance by is our history. What we need to look at is the emerging technologies which we can play a greater role in - whether it's software development or design requirements. We have some of the finest designers in the world in this country. So given those opportunities, we could provide those skills - not necessarily hardware, but all the other matters that go with management training and development and scientific development. These things we have available to us. There's massive research skills available to us. We can provide those skills where they're necessary.

ALI MOORE: That wouldn't mean big jobs, though, would it? Because the production would stay in China.

JOHN CONOMOS: Partly it could stay in China, but bear in mind that healthy domestic market could be the beneficiary. If we produce such high-tech components, as I'm referring to, they are exportable. So in fact, with the emerging markets, not just China, but the rest of the world, if we could find products that are suitable for those, that's our role. Then in fact we would enhance local job enrichment as well.

ALI MOORE: There's another issue that's been raised by the unions and that's a concern that you find a market and manufacturing goes well for a period of time, and then that manufacturer ups sticks and actually moves to the lower cost country. Is that a risk?

JOHN CONOMOS: That's a risk. That's always a risk. In fact, what happens with the car companies themselves: it's not so much the competition, the branding of competition; it's the parent company. So in other words, if you were to sell a car produced in Australia, say, to the Middle East, you'd essentially have to produce it at better quality and a lower price than the parent could produce it in Japan, because you've got to face the shipping distances and high costs. So you have to land the car in that country at a competitive price. So, there's massive pressure. But keep in mind we've been very successful. We produce as many export cars today as we do sell on the domestic market. So we've demonstrated great skills. And we export about 5.4 million cars - $5.4 million worth of cars last year.

ALI MOORE: You talk there about parent companies, and locally, Ford has just announced that it's not going to build the small car, the focus in this county, instead it's going to source it from, I think, in the words of the Ford boss, "cheaper operations in Asia". Does that somewhat underline the point?

JOHN CONOMOS: It's very difficult to produce small cars outside of a volume country. For example, Toyota gave up the Corolla, you may remember, a few years ago, essentially because it costs almost as much to produce a small car in this country as it does a large car. The difference being that you can get 10,000 more for the large car than you can the small car.

ALI MOORE: So we have to stick to big car market and to, as the Government is hinting or is directing its resources, to green car market?

JOHN CONOMOS: Right now, yes, but the emerging market for us is the green car market. And you would've seen where Toyota announced the early establishment of the Camry hybrid car in this country. That's quite a breakthrough.

ALI MOORE: But this focus was meant to be a green car. Isn't that an early blow to that green car plan?

JOHN CONOMOS: Well I'm not so sure about the details of it, but in fact their business plan didn't stack up. So, it is true: small cars can be produced more cheaply outside of Australia.

ALI MOORE: So what do you think will be the picture in, say, five years time: will we still have a Ford and a Holden and a Toyota manufacturing in this country?

JOHN CONOMOS: Oh, I think so, yes. I'm pretty confident that those three makers will resolve their present difficulties, because we're making these decisions right now in the midst of a very difficult economic period. So that the switch is happening towards smaller care, more efficient cars. This is the problem for the parent companies and the exchange rate is hurting the local producers here in Australia as well. So that the arrangements will be to take advantage of the Government's green car plan - $6.2 billion is on offer - which was initiated by the Australian Government and encouraging - very much encouraging the local producers to go this way. So, the fact that Ford, in one instance suggested that this particular model would not be suitable, doesn't rule them out forever.

ALI MOORE: You talk there $6.2 billion; it's a lot of money. Will this industry ever be able to survive without substantial government assistance? And particularly when you look at the global playing field, which is not exactly level.

JOHN CONOMOS: I think it'd be almost impossible to survive without government assistance within the next 10 years because, you can imagine, as you've just mentioned, we are one per cent of the world market, and almost every economy that has a car manufacturing operation has some form of support or assistance, be it now for the emerging green cars. Europe has a 10 per cent tariff arrangement, as you know. United States has its own regime for pick-up trucks, even though we are free trading now with the United States. So to suggest that Australia could go it alone, no assistance, on its own, I think would be very difficult.

ALI MOORE: Does that make it, though, I guess, a zero sum game in the end? I mean, how long can you put in taxpayer dollars to support an industry which, in your own words, is niche?

JOHN CONOMOS: Yes, I think it's a good question. I think for some time - there is a structural adjustment period that takes time. You must remember that new cars take five to seven years to bring on market, and the car companies generally work on a 10-year planning horizon. So, it's easy to be critical in the short term of say two or three years, "Why aren't you producing more efficient cars?" The car companies are moving that way, as you know. Holden will introduce a small car. Toyota's gone towards a hybrid car. And so, Ford have announced a more efficient engine. So this adjustment is now taking place. That's very much driven by the Government's desire to have this green car plan moving more quickly than it presently is.

ALI MOORE: Does it make sense, though? I mean, dollar for dollar, taxpayer dollar versus job, given the billions that are going in, does it make sense?

JOHN CONOMOS: Of course it makes sense. As I mentioned a moment ago that $5.4 billion worth of exports alone; compare that to the $6.2 billion in one year - $5.4 billion in one year, $6.2 billion over more than 10 years: I think it makes a lot of sense. If we can generate $5 billion plus per year for the next 10 years: not a bad industry.